Jacinda retains Michael Cullen’s services

by Christie on March 8, 2019 at 9:30am

Jacinda Ardern Taxes meme

In my article yesterday, I opined that Michael Cullen, as the chairman of the TWG, should quietly go off into the sunset and leave the politics to the government. I implied, quite deliberately, that he just couldn’t keep out of the political issues raised by the TWG report, particularly around Capital Gains Tax (CGT). I was wrong. Michael Cullen has been retained by the government, at a rate of $1,062 per day, to defend the government’s position on the tax, for reasons only clear to the government. quote.

This week it emerged that while the Tax Working Group has disbanded, Cullen has had his contract extended by the Government.

Cabinet papers show Cullen was to be paid $1062 a day in his role as chairman of the TWG.

“We extended his appointment as the chair of the TWG to 30 June because we were aware there would be extended public discussion on the report, and this has played out,” Finance Minister Grant Robertson said in a statement. end quote.

There are only a couple of possible reasons for this. The first is that the government wants to distance itself from the debate while they work out their strategy. The second, but more likely scenario is that they are simply not competent enough to be able to handle all the questions that the media and other interest groups will have over the report.

Because of their propensity to hand everything over to ‘experts’ and do very little themselves, my money is on the latter scenario. quote.

In his latest statement, Cullen said the TWG had provided a framework for environmental taxes and how to use taxes to address environmental challenges.

“It does not, however, recommend immediate adoption of specific environmental tax instruments. Nor does it make recommendations about specific levels for any environmental taxes, other than to note that the Emissions Trading Scheme (ETS) has under-priced the cost of greenhouse gas emissions,” the statement said. end quote.

This illustrates my point. Jacinda clearly knew nothing about these other taxes recommended by the TWG, which was why she could not give a straight answer to Simon Bridges’ questions on the subject in the house this week. Shameful, but not surprising. quote.

The statement said CGT would not be paid when ownership was transferred in certain circumstances.

“For example, if a farmer dies and the property is passed down through inheritance, no tax would be payable at that time.”

The statement does not mention what happens in the event that multiple family members inherit a farm but opt to transfer the ownership to one child, a common practice in family farms.

Critics have warned that even if a sibling sold their stake to another sibling for a $1, the transaction would trigger the same CGT bill as if the shareholding had been sold at market value.

end quote

Yes. You have to watch out for this. All sales to ‘associated persons’ are deemed to be made at market value and any taxes are payable at that rate, regardless of the actual sale price. CGT on asset sales between family members, such as farms, will be no different. quote.

Earlier on Thursday, Federated Farmers renewed its appeal for the Government to reject most of a “raft of new taxes” proposed by the TWG.

“Small business would pay the costs, large business would spend thousands avoiding the costs and tax advisors and valuers would have a field day,” Federated Farmers vice-president Andrew Hoggard said.

Maybe not. One of the few statements that Winston has made on the subject is that he is not going to allow accountants and valuers to make a fortune on the back of this tax. This suggests one of two things. Either he is planning on watering it down so much that the tax will only apply to investment property (possibly including holiday homes and lifestyle blocks) or he is going for the ‘grandfathering’ option, meaning that only assets purchased after the introduction of the tax will be liable for CGT. All assets owned on 31 March 2021 will be unaffected by CGT.

It is impossible to second guess Winston. It is like trying to nail jelly to a tree. In the meantime, though, the government is quite safe from all the nasty attacks on them. Michael Cullen has got their back, and is being paid handsomely for it.

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